HDFC Bank Profit Rises 5% to Rs 19,060 Crore Amid Governance Storm

HDFC Bank’s net profit rose 5% year on year to Rs 19,060 crore (roughly $1.97 billion) in the quarter ended June 30, India’s largest private lender said Saturday. The print beat Nomura’s forecast, missed Kotak Institutional Equities’ estimate, and arrived alongside a 79% collapse in provisions that owes more to a year-ago accounting quirk than to genuinely cleaner loans.

The bank’s underlying franchise, loans, deposits and margins, looks steady enough. One earnings call cannot fix the governance cloud that has cost the stock nearly a fifth of its value this year. That cloud traces back to a chairman’s abrupt exit and a probe into a state agency’s deposit rate.

Profit Splits Three Forecasts in One Print

The headline number was Rs 19,060 crore, up from Rs 18,155 crore a year earlier. Net interest income, the gap between what the bank earns on loans and pays out on deposits, climbed 7% to Rs 33,534 crore from Rs 31,438 crore.

Against forecasts, the quarter reads as a split decision. HDFC Bank beat Nomura’s profit estimate of Rs 18,780 crore but missed Kotak Institutional Equities’ call for Rs 19,691 crore. A separate poll added a third data point: the earnings were slightly below the CNBC-TV18 poll estimate of Rs 19,332 crore. On interest income, NII also missed analysts’ expectations of Rs 34,353 crore, a shortfall that lined up with Nomura’s own Rs 33,580 crore model and Kotak’s higher Rs 34,383 crore call.

HDFC Bank was not the only large lender opening its books that weekend. ICICI Bank reported the same day, part of a Q1 season that has already rewarded smaller lenders over India’s biggest names in early trading.

Why Did Provisions Fall 79% in a Year?

Provisions and contingencies fell 79% to Rs 3,060 crore, giving HDFC Bank a credit cost ratio of just 0.40%. That sounds like a bank whose loan book got dramatically safer in twelve months. It did not.

The real driver sits in the base quarter. Q1FY26 provisions were elevated as HDFC Bank utilised part of the HDB Financial Services IPO proceeds to create ₹10,700 crore of floating and contingent provisions, a deliberate reserve build rather than a response to bad loans. The bank’s own finance chief, Srinivasan Vaidyanathan, told analysts on the year-ago call that the extra buffers were modeled across pools of assets under stress scenarios rather than tied to any single deteriorating account, a point laid out in the bank’s own Q1 FY26 earnings call transcript.

Strip that windfall out and the comparison flips. Provisions actually rose 17% from the Rs 2,610 crore reported in the March quarter, a sequential climb that looks more like credit costs normalizing upward than a bank getting cleaner. Four years ago, in the quarter that ended March 2022, the total credit cost ratio was at 0.96%, as compared to 0.94% for the quarter ending December 31, 2021, roughly double where it sits today, which shows how far the bank’s reserving has already come and how little room is left to fall further.

Asset Quality Improves on Paper, Slips by the Quarter

Gross non-performing assets fell more than 3% year on year to Rs 35,846 crore, while net NPAs rose slightly to Rs 12,357 crore. The ratios tell a similar two-speed story.

Every line improved from a year ago and worsened from the quarter before. Capital adequacy is still comfortably above regulatory minimums, but it has now declined for two straight readings. Net interest margin came in at 3.26% on total assets and 3.40% on interest-earning assets, a number the bank is defending partly by repricing loans: it raised its lending benchmark rate by up to 10 basis points in early June.

Loans and Deposits Grow, but the CASA Cushion Thins

Away from provisions and ratios, the balance sheet kept expanding at a pace few global banks can match.

• Gross advances reached Rs 30.61 lakh crore, a 15.4 per cent year-on-year increase
• Total deposits rose to Rs 31.71 lakh crore, a 14.7 per cent rise from a year earlier
• CASA deposits climbed 9.4 percent year on year to Rs 10.26 lakh crore, though they declined 3.3 percent sequentially from March
• The full balance sheet grew to Rs 43.97 lakh crore, up from Rs 39.54 lakh crore a year earlier

The CASA dip matters more than it looks. Current and savings deposits are the cheapest money a bank can raise, and a sequential decline means HDFC Bank leaned harder on costlier term deposits to fund that loan growth, a headwind for margins even as the total franchise expands.

The Governance Timeline Behind a Rough Year for the Stock

None of the numbers above explain why HDFC Bank shares have been the worst performer on the Bank Nifty for most of 2026. That story runs on a separate track.

1. March 12, 2026: The bank’s Audit Committee, chaired by M D Ranganath, formally orders an internal vigilance investigation into the marketing department’s dealings.
2. March 18, 2026: Non-executive chairman Atanu Chakraborty resigns, writing that certain practices he had observed were not in congruence with my personal values and ethics.
3. May 27, 2026: The Indian Express reports that the bank allegedly paid ₹45 crore in disguised differential interest to the Maharashtra State Road Development Corporation (MSRDC), a state government agency, sending shares down more than 2%.
4. May 28, 2026: HDFC Bank tells the US Securities and Exchange Commission the matter has no material impact on its financials and does not trigger SEBI disclosure norms.
5. June 30, 2026: Former Finance Secretary Rajiv Kumar is appointed part time chairman, filling the seat Chakraborty left vacant.
6. July 18, 2026: The bank reports Q1 FY27 results, its first full earnings print since the chairman’s exit.

The internal probe’s findings were pointed. The probe, conducted between March and April 2026, concluded that over ten top officials bore responsibility, including MD and CEO Sashidhar Jagdishan, CFO Srinivasan Vaidyanathan, and CMO Ravi Santhanam. HDFC Bank has rejected any suggestion of wrongdoing, and the alleged arrangement itself was narrow in scope: routing extra returns to one government depositor. The arrangement effectively gave MSRDC a return of 6.01 per cent on its savings deposits, far above the 3.5 per cent available to ordinary customers, according to the original investigation.

Brokerages Hold Buy Ratings Even After a Governance Scare

What makes this year unusual for HDFC Bank is that the operating business barely wobbled while the valuation did. Under founding CEO Aditya Puri’s 26-year stewardship, the bank had built one of the highest governance premiums of any lender in Asia, with a price-to-book multiple that once reached five to six times. By March 2026, even before Chakraborty’s resignation, that multiple had already compressed to approximately 2.31 times.

The franchise is intact, loan growth is resilient.

Vaqarjaved Khan, a senior fundamental analyst at Angel One, made that case after the 2026 selloff deepened, arguing the drop reflected a governance discount rather than a break in the underlying business. Heading into these results, that view still held across the Street: street sentiment on HDFC Bank was bullish, with not a single sell or hold call among the 39 analysts tracked by Investing.com, and a consensus “Strong Buy” rating with an average 12-month price target of Rs 1,039.79.

Jagdishan’s Third Term Is the Next Decision Point

The governance overhang is not fully closed. Jagdishan, who took charge in 2020, received a three-year extension in 2023, with his current term ending in October 2026. HDFC Bank’s board is expected to initiate the formal process for his third term after external legal advisors completed their review, clearing the way to submit the proposal to the Reserve Bank of India, with a board decision expected by the end of July.

That decision, not this quarter’s profit line, is what will tell shareholders whether 2026’s boardroom turmoil is actually behind the bank.

Frequently Asked Questions

What is the MSRDC controversy involving HDFC Bank?

Investigators allege the bank routed extra returns to the Maharashtra State Road Development Corporation through its marketing budget, disguised as a road safety sponsorship. The bank’s Audit Committee ordered the internal investigation after an audit of the marketing department flagged irregularities and rated its functioning as unsatisfactory.

Who is HDFC Bank’s chairman after Atanu Chakraborty’s resignation?

Rajiv Kumar, a former Union finance secretary, took over as part-time chairman effective June 30, 2026, after the Reserve Bank of India approved a three-year term, filling the seat left vacant by Chakraborty’s March resignation.

Will CEO Sashidhar Jagdishan get a third term?

His current term runs out in October 2026. The board was expected to decide on a third term by the end of July 2026, after legal advisors’ review cleared the path to seek RBI approval.

How much has HDFC Bank paid shareholders in dividends this year?

For FY26, HDFC Bank declared a final dividend of Rs 13 per share, and including the interim dividend, shareholders received Rs 27 per share over the past 12 months. The bank also issued bonus shares in a 1:1 ratio in August 2025.

How is HDB Financial Services performing separately from its parent?

The HDFC Bank subsidiary posted its highest-ever quarterly profit in the June quarter, with PAT surging 38.3 per cent year on year and a net interest margin of 8.35%, a bright spot largely insulated from its parent’s governance headlines.

Disclaimer: This article is for informational purposes only. Brokerage price targets and ratings cited belong to the respective analysts and firms, not to this publication, and figures are accurate as of publication on July 18, 2026. Consult a SEBI-registered financial advisor before making investment decisions.